U.S. Federal Trade Commission Continues Enhanced Enforcement of the “Made in USA” Guidelines

The U.S. Federal Trade Commission regulates the labeling and advertising of products as “Made in the USA.” Under the Commission’s policy guidelines, a claim that a product is simply “Made in the USA” is permissible only if a product is “all or virtually all” produced in the United States.

The agency has not articulated bright-line rules for determining whether a product meets the standard but, in general, three things must be true in order for a product can be labeled as “Made in the USA”:

The final assembly/production operations, which must give the product a new name, use or essential character, must take place in the United States.

The substantial majority of the product’s value must be attributable to U.S. labor and materials.

Any foreign materials/components must be sufficiently “remote” from the finished good that the average consumer would not find a “Made in the USA” label deceptive.

In 1997, the agency first issued guidance regarding the standards that products must meet in order to be labeled or advertised as products of the United States. Despite a flurry of enforcement actions between 1997 and 2001, enforcement subsequently dropped off. Between 2002 and 2013, the Commission took specific enforcement action in only two “Made in the USA” cases.

But things are changing. Over the past two years, the Commission and its Staff have placed renewed focus on enforcing the standards, as evidenced by agency consent decrees and Staff closing letters.

In 2013, the Commission entered into a consent decree with a company selling a variety of consumer products regarding Made in the USA violations.

Further, a review of Staff closing letters for 2013 and 2014 shows substantial enforcement activity which was resolved based on the investigated companies’ voluntarily coming into compliance, and thus did not necessitate consent decrees.

Significantly, the Staff closing letters suggest that the agency may be willing to enforce the standards for goods that are not traditional consumer retail products. In particular, the Staff has issued closing letters to several companies selling couplings used in fire-fighting equipment–a product likely only to be sold business-to-business or business-to-government, and not directly to individual consumers.

Renewed enforcement of the “Made in the USA” guidelines represents both a challenge and an opportunity for U.S. manufacturers, given widespread use of globally-sourced components. Combined with increasing state and federal legislative efforts to mandate “Buy America” requirements in government purchases, this new enforcement may spur further re-shoring of component and raw material manufacture.

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